Uptick in wage growth likely in 2014, Bloomberg index says

Here’s a year-end forecast that might give private-sector workers reason to smile: Bloomberg BNA’s Wage Trend Indicator sees the pace of income growth accelerating in the second half of 2014.

After consecutive quarters of flat wages, the index rose to 98.78 in the fourth quarter from 98.70.

“We are beginning to see some improvements in the labor market, with the unemployment rate falling to 7 percent in November,” said economist Kathryn Kobe, a consultant who maintains and helped develop Bloomberg BNA’s WTI database.

In the coming months, Kobe said private-sector wage growth was expected to be 2 percent, slightly above the 1.8 percent year-over-year gain reported by the Labor Department in the third quarter.

The index measures seven components. Of those, three were positive in the fourth quarter, three were negative and one was neutral.

The three positive components were the unemployment rate; the average hourly earnings of production and non-supervisory workers, both from the Labor Department; and the share of employers reporting difficulty in filling professional and technical jobs, reported by a Bloomberg BNA survey.

Negative factors were job losers as a share of the labor force, from the Labor Department; the share of employers planning to hire production and service workers in the coming months, from Bloomberg BNA’s survey; and industrial production, as reported by the Federal Reserve Board.

The neutral component was forecasters’ expectations for the rate of inflation, compiled by the Federal Reserve Bank of Philadelphia.

The index is published monthly and Bloomberg BNA said it is designed to detect changes in wage growth before they become apparent in the BLS’ employment cost index.